The Global Macro Monitor blog was started b an independent trader and economist and, in a prior life, was a global macro hedge fund PM/trader, headed emerging market bond trading desks on Wall Street, and an economist/global strategist, beginning his career at the World Bank in the mid 1980's. His unique and unconventional views are reflected on his website at marcromon.wordpress.com.
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We constructed these charts with data from today's release of the Federal Reserve's Flow of Funds. They are both stunning and frightening as they illustrate the cardiac arrest that took place in the credit markets. The collapse in credit issuance/borrowing began in 2008 and would have been net negative without the Federal government. In 2009, for example, the Federal government was 141 percent of total net credit borrowings.
If, as the President says, "?the flow of credit is the lifeblood of our economy", the country would have died in 2009 had not the policymakers taken the extraordinary measures they did. These charts illustrate how close we were to the abyss and should give a clearer perspective on what Bernanke & Co. were/are up against. They are heroes, in our book, for stabilizing the situation and pulling us back from the abyss. The jury is still out, however, on long-term structural adjustment and preventing a global sovereign debt crisis.
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This entry was posted in Black Swan Watch, Budget Deficit, Charts, Fiscal Policy, Sovereign Debt, Sovereign Risk and
Striking illustration. Wonder what the next three years look like?
The pusher is a hero. The junky is grateful.
Thanks Paul – nice for you.
(as in when you rob Peter to pay Paul, Paul will generally be be grateful)
Awesome graphic of the world’s biggest money laundering scheme as fed prints free money for the TBTF to lend to the US at 3%. I don’t think any of us will live long enough to see the US portion of the flow of funds under the line
Heroes, Heroes, F*ing Heroes?
The Fed created the credit bubble, did not see the bubble when it was expanding, and when it burst, they fill the credit void with unprecedented money and credit creation…
These are no heroes, these are destroyers of wealth…only if you are hugedly indebted, highly levered, are these guys heroes, to the prudent they are criminals!
‘If, as the President says, "?the flow of credit is the lifeblood of our economy", the country would have died in 2009 had not the policymakers taken the extraordinary measures they did.’
A strong statement indeed! Not necessarily false, but apparently based on the insight that a Ponzi scheme must keep growing — backsliding will instantly throw it into a liquidity crisis.
Even if the federal government saved the Ponzi economy, the larger question is why our way of life should be funded by sequential bubbles in the financial sector, rather than by a formerly productive economy.
Wes,
you went with: “…The Fed created the credit bubble, did not see the bubble when it was expanding, and when it burst, they fill the credit void with unprecedented money and credit creation"¦”
try: “…The Fed created the credit bubble, did not see the bubble when it was expanding, and when it burst, they fill the credit void with unprecedented (excising this: money and) credit creation"¦”
There is No Money in Circulation, and, certainly, the FedRes does not Traffic in such..
see: Definition: Money is a good that acts as a medium of exchange in transactions. Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange. Most authors find that the first two are nonessential properties that follow from the third. In fact, other goods are often better than money at being intertemporal stores of value, since most monies degrade in value over time through inflation or the overthrow of governments. http://economics.about.com/od/termsbeginningwithm/g/money.htm
to begin with..
and: http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Federal+Reserve+Note+Fraud
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Rothbard+What+has+the+Government+done+to+our+Money
for further..
Life Support comes to mind looking at this chart. Anyone understanding the structural nature of the Federal Debt knows this life support is here to stay. This says nothing of state debt levels either… but then hey, that’s what QE3 will for, right?
…MEH, agreed…
…”creating money” is more of a classical euphemism..,
…as the nervous Helicopter pilot stated on 60 minutes, what bothers him most is that people say he is “printing money”…however, in a practical sense, what the diff?…he sure as hell is printing Au
…isn’t…
Wes,
w/: “"¦"creating money" is more of a classical euphemism…”, no kidding~
even, the Dictionary (ex. http://www.thefreedictionary.com/money ) glosses over the import of it..
eu·phe·mism n. The act or an example of substituting a mild, indirect, or vague term for one considered harsh, blunt, or offensive: “Euphemisms such as ‘slumber room’ . . . abound in the funeral business” (Jessica Mitford).
http://www.thefreedictionary.com/euphemism
…”slumber room”, the eventual resting place of all money fiat
That chart shows me it would’ve been cheaper to go Swedish on them.
Nice the more detail you need is on the lending sector flipside showing that “all other” credit market down abt 70% in 2008 was securitization and shadow banking going away. Clear by June 2008, THATS WHAT KILLED US. Not the Lehman myth of Sept that most officials and Wall st still believe in. BTW securitization still absent and banking not interested
But we can understand why that didn’t happen if Simon Johnson is right and the banks themselves are the Fed’s true and only constituency.
Great post. Amazing chart.
Debt = Savings. They balance. We can easily force a “great depression” if we want the price level of everything to go lower (commodities / housing still down 30% from 2008). But why?
@Mark E Hoffer:
There is No Money in Circulation, and, certainly, the FedRes does not Traffic in such..
What is this supposed to mean? That, e.g., US-dollar, which is in circulation (or isn’t it?) is no money? And why should this be true? Because some guru of Austrian nonsense, named Rothbard, and the Mises Institute, claim this too?
see: Definition: Money is a good that acts as a medium of exchange in transactions….
Why “see”? From this statement according to which money acts as exchange of transactions doesn’t follow the claim that there was “no money in circulation”. Nor the claim that the US-dollar wasn’t money follows from it.
@Wes Schott and @Mark E Hoffer:
"¦"creating money" is more of a classical euphemism..,
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